Cattle Futures Drops as U.S. Supply Increases; Hog Prices Fall

Sept. 22 (Bloomberg) -- Cattle futures fell the most in two
weeks on concern that supplies available to U.S. beef processors
will increase. Feeder cattle dropped to the lowest price since
June, and hogs declined.

Cattle purchases by U.S. feedlots jumped 7.1 percent last
month from a year earlier, adding 2.27 million head to herds,
the most of any August since 2006, the U.S. Department of
Agriculture said Sept. 17. Cattle prices in Chicago have fallen
every day since the report, dropping 3.7 percent.

“That’s where the aftershock is coming” from, the
unexpected feedlot expansion, said Paul Beere, a market adviser
at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin.

Cattle futures for December delivery fell 1.85 cents, or
1.8 percent, to 98.2 cents a pound at 2:06 p.m. on the Chicago
Mercantile Exchange. That’s the biggest decline since Sept. 7.
Earlier, cattle slid to 98.1 cents, the lowest price for a most-active contract since Sept. 9. Futures have jumped 14 percent
this year.

Feeder-cattle futures for November settlement dropped 1.325
cents, or 1.2 percent, to $1.097 a pound on the CME, after
reaching $1.09275, the lowest level for a most-active contract
since June 10. The commodity has gained 14 percent this year.

“Feeders are in a tough spot,” said Dennis Smith, a
senior account executive at Archer Financial Services Inc. in
Chicago. The rising corn prices are “a major factor against the
feeder market” and are pressuring prices, he said.

Corn futures have climbed 22 percent this year, touching
$5.2375 a bushel on Sept. 20, the highest level for a most-active contract since Sept. 30, 2008.

Hogs Decline

Hog futures for December settlement fell 0.75 cent, or 1
percent, to 76.325 cents a pound in Chicago.

“I’m expecting some more weakness” from pork prices
“that will eventually translate into weakness in the cash-hog
market,” Smith said. “I’m expecting a defensive trade as far
as the hog-futures markets go.”